Cheque Bounce Meaning, It’s Consequences & Much More!

With the advent of the digital payment system, life has become easier for most of us. Banking transactions are simpler and faster. Yet, cheques have continued to be a preferred mode of financial transactions for many.

Cheques have been considered a safe mode of transferring funds and making purchases for years. However, the risk of a ‘bounce’ or ‘dishonour’ comes with the use of cheques. The risk entails fines, penalties, and even imprisonment.

A cheque is usually a written commitment made by the payer to the payee against a sum of money. The payee, also known as the drawee, deposits this cheque in the bank. In an ideal situation, the payer’s bank transfers the funds from the payer’s account to the payee.

However, sometimes, the payer’s or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured cheque’.

A cheque can be dishonoured for a host of reasons. It could be because the issuer of the cheque did not have sufficient balance in the account or the signature on the cheque did not match exactly. At times, cheques are dishonoured if account numbers fail to match. The bank may also dishonour disfigured and damaged cheques.

A cheque may bounce if it has expired or has a problem with the issuing date. Sometimes, the issuer may choose to stop the payment. In that case, too, the cheque is considered as dishonoured. There could be various other reasons for a bank to dishonour a cheque.

A dishonoured cheque attracts a penalty on the issuer of the cheque. It depends on the reason for the bounce.

• Issuing a cheque with insufficient funds is a criminal offence under the Negotiable Instruments Act 1881.

• The payer can face prosecution for writing a cheque against an account with insufficient funds.

• The payee can either pursue legal action or allow the payer to reissue the cheque within three months.

• The payer risks imprisonment for up to two years for issuing a dishonoured cheque.

• Banks impose penalties for cheque dishonour, which vary between institutions and depend on the amount.

The simple answer to this is: 'Go digital and avoid cheque dishonour charges.'

An efficient way of avoiding cheque dishonour charges is to bank digitally. Instead of issuing a cheque, choose to transfer funds online. Use NetBanking or Mobile Banking to transfer funds to third-party accounts. You can also make transfers within your accounts using the digital payment system. Click here to get started.

If you have to issue a cheque, here are a few things to keep in mind;

• Make sure you issue an account payee cheque.

• Use the signature that is registered with the bank.

• Ensure that there is sufficient balance in your account.

• Fill in the details on the cheque carefully.

Click here to learn further about dishonoured cheques.